India: India Announces New Foreign Direct Investment Policy, 2017 – 2018

Last Updated: 13 September 2017
Article by Rishabh Shroff

The ability to attract large scale Foreign Direct Investment (FDI) into India has been a key driver for policy making by the Government. Prime Minister Modi seems to be going along the right track, with India receiving FDI inflows worth USD 60.1 billion in 2016-17, which was an all-time high. Hence, the FDI policy of India has always been closely watched and carefully amended over the years.

On August 28th, 2017, the Department of Industrial Policy and Promotion (DIPP) had issued the updated and revised Foreign Direct Investment Policy, 2017 – 2018 (FDI Policy 2017). The FDI Policy 2017 incorporated various notifications issued by the Government of India over the past year.

Please find below a brief analysis of the key amendments brought by the FDI Policy 2017 to the erstwhile FDI Policy of 2016 and their potential impact on FDI in India:

New Streamlined Procedure for Government Approval

  • Abolition of the Foreign Investment Promotion Board (FIPB): The most significant amendment to the FDI regime has been the institutional change brought by notification dated June 5th, 2017 issued by the Department of Economic Affairs confirming the abolition of the FIPB (the erstwhile government body authorised to approve proposals for FDI requiring government approval); and the introduction of the 'Foreign Investment Facilitation Portal' (FIFP), an administrative body to facilitate FDI applicants.
  • Introduction of 'Competent Authorities': The FDI Policy 2017 defines and lists sector-specific administrative ministry / department as 'Competent Authorities' empowered to grant government approval for FDI. Competent Authorities listed in the FDI Policy 2017 include the DIPP in respect of applications for FDI in the Single Brand, Multi Brand and Food Product retail trading and the Department of Economic Affairs of India for FDI in the financial services sector.
  • Introduction of 'Standard Operating Procedure' (SOP) to process FDI proposals: The DIPP had also issued the SOP which sets out a detailed procedure and timeline for applications as well as the list of 'competent authorities' for processing government approvals for FDI in India.

Under the SOP, investors are required to make an application on the website of the FIFP, supported by the specified documents which inter alia include relevant charter documents, board resolutions, etc. The application shall then be forwarded to the concerned 'Competent Authority' and the Reserve Bank of India (for comments from a foreign exchange law perspective) within 2 (two) days. Proposals requiring security clearance (in sectors such as defence and telecommunication) shall also be forwarded to the Ministry of Home Affairs. The Competent Authority shall process the complete proposal and convey the approval / rejection of such proposal to the applicant in the format prescribed under the SOP.

  • Key provisions likely to benefit applicants with proposals for FDI: Consultation with the DIPP has been made strictly need based, leading to a more streamlined procedure and expeditious timeline (maximum time of 10 weeks) for approval. Moreover, the FDI Policy 2017 also states that the Competent Authority may only reject a proposal, or stipulate conditions in addition to those listed in the FDI Policy 2017 / applicable sectoral laws with the concurrence of the DIPP.

Conversion of Limited Liability Partnership's (LLPs)

An LLP, operating in sectors/activities where 100% FDI is allowed under the automatic route (without FDI-linked performance conditions), is permitted to convert into a company. Similarly, conversion of a company into an LLP is also now permitted under the automatic route.

Issue of Convertible Notes by Start-ups

  • The FDI Policy 2017 has introduced the issuance of (a) 'Convertible Notes' (instruments representing debt repayable at the option of the holder, or convertible into equity shares within 5 years from issue) by Start-ups to persons resident outside India; and (b) equity or equity linked / debt instruments by Start-ups to Foreign Venture Capital Investors.
  • Issuance of Convertible Notes is, however, subject to the following conditions: (a) Under automatic route, a Non-Resident may purchase Convertible Notes for approximately USD 39,500 or more in a single tranche and the consideration shall be received by inward remittance through normal banking channels or as otherwise permitted under the extant foreign exchange regulations applicable; (b) Start-ups engaged in sectors requiring government approval for FDI may issue Convertible Notes only with government approval; (c) Non-Residents may acquire or transfer Convertible Notes from or to persons resident India or Non-Residents only in accordance with applicable pricing guidelines under the Indian foreign exchange regulations; and (d) Start-ups issuing Convertible Notes must comply with reporting requirements prescribed by the Reserve Bank of India.

Revisions to existing provisions of the FDI Policy of 2016

The FDI Policy 2017 also incorporates all Press Notes issued by the DIPP during the course of the year. Set out below are the sector-specific significant amendments brought about in the last year:

  • Manufacturing: To further liberalise the manufacturing sector (which allowed 100% FDI under the automatic route), 100% FDI under government approval route was allowed for retail trading, including through e-commerce, in respect of food products manufactured and/or produced in India.
  • Civil Aviation: The threshold for FDI in existing projects under the automatic route was increased from 74% to 100%.
  • Single Brand Retailing: Sourcing norms applicable for FDI were relaxed and will not be applicable up to 3 (three) years from commencement of the business i.e. opening of the first store for entities undertaking single brand retail trading of products having 'state-of-art' and 'cutting-edge' technology and where local sourcing is not possible.
  • Other Financial Services: The previously applicable capitalisation norms for non-banking financial services companies were struck off, and all financial sector activities by entities already regulated by financial sector regulators fall under the 100% automatic route of investment, with applicability of sectoral laws.

Some Thoughts

The changes in the FDI Policy 2017 display the efforts of the Indian Government to remove of multiple layers of bureaucracy, and to process proposals for FDI under the government approval route in a more streamlined, positive and expeditious manner. The Government has eased 87 FDI rules across 21 sectors in the last 3 years, opening up traditionally conservative sectors like rail infrastructure and defence. Even India's agriculture sector has received FDI worth INR 515.49 crore in 2016-17.

The FDI Policy 2017 for the first time makes specific reference to fund raising through convertible instruments by Start-ups, which should encourage fund raising by Indian Start-ups from FVCI's and Non-Residents. The definition of Start-ups as provided in the Policy is also proposed to be incorporated in the Patents Rules, 2017. The three year relaxation of the local sourcing norms in single brand retail should make it easier for the likes of iconic investors Apple and Tesla to open shop in India. But further details may be needed before the likes of such investors may commit to India.

It is expected that the Government will continue to bring about liberalisation of the FDI regime in India in the months to come. All in all, we intend to maintain our trajectory towards remaining the world's most attractive destinations for foreign investment.

* The author was assisted by Kunal Savani, Director – Tax, Private Client Practice and Abhilasha Malpani, Associate

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
SKP Business Consulting LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
SKP Business Consulting LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions